Sign InAmazon.com Expands Online Pharmacy Operation with Major Deal, Positively Impacting Future Revenue
Summary
Amazon's recent deal with Blue Shield of California suggests potential expansion and increased future revenue, although competition from Walmart remains fierce; with strong fundamental factors and technical indicators, the stock is categorized as a 'Buy' and is predicted to show positive movement in the coming week and towards its DCF value or higher; however, investors should closely monitor the competitive landscape and the upcoming earnings announcement on 10/25/2023 for potential volatility. (August 2023)
Fundamental Analysis
Amazon.com, Inc. (AMZN) is a leading player in the e-commerce market. As of its last close on August 16, 2023, the stock was valued at $135.07, showing a decline of 1.89% from its previous close. Over the past year, the stock has traded between a low of $81.43 and a high of $143.63 with a substantial market cap of $1.39 trillion.
A crucial development has emerged with Amazon's Online Pharmacy landing a major deal with Blue Shield of California. This could potentially indicate an expansion of Amazon's business operations and thereby an increase in its future revenue potential. This news is particularly weighty as it indicates that Amazon could be taking market share from other established players such as CVS Caremark. However, it's also important to note that competition remains fierce, notably from Walmart, which has reported solid eCommerce sales for Q2 and is said to be gaining market share from Amazon.
The company's EPS stands at $0.42 and it currently operates with a high PE ratio of 322.33, which signifies that the market has high expectations for the company's future growth.
The consensus estimate for the stock is a "Buy," with 36 brokers suggesting to buy, and 4 suggesting to hold. The consensus target price, averaging analysts' expectations, stands at $162.60, while the highest and the lowest target price set by these analysts reaches as high as $270.00 and as low as $103.00, respectively.
Technical Analysis
Amazon displayed a mild bearish trend on August 16th, with the stock's closing price below the 50-day moving average of $130.73 and above the 200-day moving average of $106.75. Such a position typically indicates a generally positive sentiment among investors. The stock's RSI stands at 59, suggesting that it is nearing overbought territory.
The MACD for the past three months stands at 1.58, implying that the stock is on an upward trend. The Stop-Loss mark is placed at $128.14, and any break below this level might trigger further selling.
Notably, the average trading volume stands at approximately 59.24 million shares, while the volume for the last trading session was notably below this at approximately 28.27 million shares. The stock's volatility, as indicated by the ATR, is $2.69 which should be considered while making any trading decisions.
Predictions
The discounted cash flow (DCF) valuation for Amazon stands at $140.67, indicating a potential upside given the current stock price of $135.07. Therefore, considering both strong fundamental factors and technical indicators, the stock could possibly show a positive movement in the next trading day and the coming week, towards its DCF value or potentially higher.
Evaluation
Despite minor setbacks, the fundamental prospects of Amazon remain strong with an expanding business portfolio and a commanding market presence. This is further supported by a positive technical setup. Therefore, the stock is categorized as a 'Buy.' However, investors should closely monitor the competitive landscape, especially the performance of other eCommerce giants like Walmart. Potential investors must also keep in mind the company's earnings announcement on 10/25/2023, which may cause significant volatility in the stock price.
